Shares of Lululemon Athletica (LULU) have popped in after-hours trading on reports that founder Chip Wilson will sell his stake in the company. Reuters has the details:
REUTERS Chip Wilson, the founder of Lululemon Athletica Inc, has agreed not to wage a proxy contest on the yoga apparel maker, in return for two additional director positions and number of other governance changes, the company said on Thursday.
As part of the agreement, Wilson will sell half of his 27 percent stake to private equity firm Advent International for $845 million. Advent will add two of its senior managers, David Mussafer and Steve Collins – to Lululemon’s board, expanding it to 12 members. Mussafer will take the role as co-chairman alongside existing chairman Michael Casey.
Shares of Lululemon have gained 6.8% to $41.69 at 5:34 p.m. in after-hours trading after dropping 2.4% during regular market hours today.
UPDATE: Belus Capital’s Brian Sozzi interprets Lululemon’s press release:
While the market cheers the news of Chip Wilson selling a part of his stake, theoretically relieving some of the headline risk from the prolonged public board squabbles, buyer beware. Here are two things we decoded from this news bomb:
1. Lululemon is likely to issue a disappointing second quarter and outlook (again) when it announces earnings on September 11. Not only have we been unimpressed with the lack of newness in the assortment, but Under Armour's (UA) growing dominance in women (and increased floor space at Dick's Sporting Goods (DKS) and Macy's (M)) as seen in the second quarter likely was siphoned right from the cash registers of Lululemon.
2. Chip Wilson in not so many words suggested Lululemon, although having ample long-term growth opportunities, does NOT own the female athletic apparel market and does NOT deserve to be valued as such by the market. Barriers to entry have come down, and the fact is rivals are doing a better job getting more versatile product to market quicker than Lululemon.
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